Gold loan companies protest to RBI

Urge level playing field with banks, cite Rao panel report in their support; warn of loss of business to lenders in unorganised sector

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Fearing a rapid loss in business to banks, gold loan companies have urged the Reserve Bank of India (RBI) to provide a level playing field.

In a recent meeting with RBI officials, gold loan companies emphasised that the latest move by the banking sector regulator favours banks lending against gold jewellery at the cost of private sector players in this business.

RBIs move is set to cap branch expansion of gold loan companies and prove an obstacle in bringing out the idle gold in the country, they argued.

Gold loan non-banking finance companies (NBFCs) are doing a socially useful function and that provides a strong rationale for careful regulation of the activities is what the K U B Rao committees recent final report said on the subject. The report had a detailed analysis with the final recommendations, which not only clarified the negative air against gold loan NBFCs but cleared a roadmap on how to shape the sector for long-term growth.

RBIs latest move partially contrasts with the Rao committees recommendations. While the committee suggested growth measures for gold loan NBFCs, RBI has for the last 18 months taken several hard measures to cap their growth. In addition to lower LTV (loan to value), stringent norms of KYC (know your customer) and on cheque payment over Rs 100,000 restrict the growth of gold loan companies, said Arun Kejriwal, founder of Kejriwal Research and Investment Services. Rao had recommended cheque payment only of amounts above Rs 500,000.

A person wanting a gold loan is in very urgent need of funds. Paying him by cheque would extend his waiting period by two more days before the actual monetising of gold. He or she would prefer to go to moneylenders or pawn brokers, who would address his need upfront. And, some banks in the south do not insist on an account for customers. All this would dampen matters for gold loan companies.

This comes even as the central bank has been vocal about financial inclusion and bringing about inclusive growth. One of its key criteria in issuing the new banking licenses is that the entity should have strong presence in the rural hinterland.

RBI has continued its cap on LTV to 60 per cent for gold loan NBFCs, despite the Rao committee recommending its extension to 75 per cent. For banks, the LTV continues at 75 per cent and sometimes goes to 80 per cent. The loss in business for NBFCs could go to the unorganised market of pawn brokers and moneylenders, on which the government or RBI does

not have control.

Extending favourable room to gold loan companies would help continue expanding the organised gold loan market, plus helping the government in monetising the countrys idle gold holdings. RBI has asked banks to help monetise idle gold by raising their gold loan portfolio but continues to restrict gold loan NBFCs from expanding their presence, say critics.
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Gold Loan
The Muthoot Gold loan portfolio is the largest in India as well as all around the globe. It is humbling to know that more than 80,000 people avail our trusted services on a daily basis.

For the past 126 years, the company has been serving the interests of customers as its top most priority. Our journey through centuries coupled with the fact that we are still a rapidly growing company highlights the trust and commitment that our customers worldwide have shown in us.

With Muthoot Finance Ltd. gold loan services, it takes no more than a few minutes for your gold to generate cash. The simple procedure that we follow allows:

Quick Loan disbursal Loan limit stretches from Rs. 1500 to Rs. 1 crore Pre-payment option-without any penalty Minimal documentation In-house gold evaluation Improves customer service in a shorter response time Strong rooms for providing safe custody for gold ornaments

Being Indias largest gold loan service provider, safeguarding the deposits of gold ornaments is our primary concern. A flexible interest rate policy is what helps us cope with volatile markets. Our gold loan range starts from Rs. 1,500 and stretches up to Rs. 1 Crore. Serving over 80,000 customers daily, we assist almost every section of the society in obtaining quick cash for leveraging their dreams.

Please Note: For loans outstanding for more than 12 months, a penal interest @ 2%p.a. will also be charged with effect from 02.05.2013.

Gold Loan Schemes

Scheme Slab Period/s Rate of Interest

Best value

upto 1 / above 1 upto 3 / above 3 upto 12% / 16% / 20% / 24% / 26% (including

Loan(MBL)

6 / above 6 upto 12 / above 12 months penal interest of 2% w.e.f 02.05.2013)

TrueValue Loan

3 / 6 / 12 months

15% / 18% / 21% p.a.

TrueValue Loan

3 / 6 / 12 months

15% / 18% / 21% p.a.

Xpress Loan

3 / 6 / 12 months

20% / 21% / 24% p.a.

Super Loan

3 / 6 / 12 months

22% / 23% / 24% p.a.

Gold Loan 6 / 9 / 12 months Installment Scheme 14% / 14.5% / 15% p.a.

Gold Loan 18 / 21 / 24 / 15 months * Installment Scheme 16.75% * / 17% / 17.25% / 17.5% p.a.

Gold Loan n/a Overdraft 20% p.a.

*Conditions apply FAQs

What is a Gold Loan?

A gold loan is a loan which is secured against gold ornaments. A borrower pledges their gold ornaments with the lender in exchange for funds. Therefore, it is a loan which is granted against a certain physical security of gold. Gold loans have successfully enabled thousands of people to mobilize their personal assets, which would've otherwise simply been kept away in a locker.

What is a Gold Loan?

A gold loan is a loan which is secured against gold ornaments. A borrower pledges their gold ornaments with the lender in exchange for funds. Therefore, it is a loan which is granted against a certain physical security of gold. Gold loans have successfully enabled thousands of people to mobilize their personal assets, which would've otherwise simply been kept away in a locker.

What are the benefits of talking a Gold Loan from Muthoot Finance Ltd.?

Customer oriented Services Quick Loan disbursal Loan limit stretches from Rs. 1500 to Rs. 1 crore (and above) Pre-payment option-without any penalty Minimal documentation In-house gold evaluation Improves customer service in a shorter response time Strong rooms for providing safe custody for gold ornaments

Who is eligible to avail a Gold Loan?

Anyone, above the age of 18, can avail a loan against gold. All they need to provide are the gold ornaments and the required documents.

What type of security do I need to provide? Do I need a guarantor?

The only security which is required from the customer in order for them to avail a gold loan from Muthoot Finance Ltd. is the very gold they pledge with Muthoot Finance Ltd. itself. There is no

need for an external/third party guarantor for the same. The loan will be sanctioned against the gold pledged.

What is the minimum/maximum tenure of the gold loan?

The minimum tenure for our gold loan is 1 day and maximum tenure for our gold loan is 15 months, each loan has a different tenure (please refer to table below).

What type of gold can I pledge to avail the gold loan?

You can pledge any type of gold jewellery/gold ornaments with us. This includes items such as necklaces, rings, bracelets, watches, 'Polki' sets, pendants, 'Kardahs', etc.

w can I repay my loan? What different options are available for the repayment?
Our gold loans can be repaid in a flexible manner. You must repay the loan at any of our branches by cash or cheque. (credit/debit cards and demand drafts are not accepted).

How do I repay my loan and can partial payment be made for the gold loan?
The loan can be repaid at any Muthoot Finance Branch, irrespective of the location. Muthoot Finance's CBS system is implemented in all branches and allows the customers to repay their loans from any branch. However, final collection of the pledged gold will have to be from the initial branch where it was pledged.Yes one can make partial payment along with the interest for the previous period. For eg. If one has a gold loan of a lakh rupees for a period of 3 months. He/she may come on 20th day from the start of the loan and pay 20 days interest and an

additional Rs.10000.00 (part payment), then this additional amount will be fully adjusted from the principal amount and from 21st day the interest will be charged on Rs.90000.00

How and when can I get back the pledged gold jewellery/ornaments?
The gold which you pledge with us will be given back to you after the loan and the complete amount has been repaid. Failure to repay the loan will result in Muthoot Finance Ltd. reluctantly auctioning off the same. The borrower will be given multiple intimations towards the same for a period of 18 months after the final date of repayment before it is auctioned. As mentioned earlier, the pledged gold has to be collected from the branch where it was initially pledged and stored.

SBI sees no stress in gold loan portfolio

Last Updated: Tuesday, April 16, 2013, 19:40 0 0 inShare38 Tags: Gold, Gold prices today, gold loan, SBI, State Bank of India

Mumbai: State Bank of India Tuesday said it does not see any stress on its Rs 35,000

crore gold loan portfolio because of the plummeting prices of the precious metal, but said it will revise its loan-to-value (LTV) ratio from the present 70 percent. "Generally we keep a 30 percent limit (of value). Yes, we will have to review that. That (LTV) will be adjusted... We would be revising our advisory for gold loans with the valuations (dropping)," SBI Chairman Pratip Chaudhuri told reporters here. The Chairman of the country's largest lender said the bank's LTV ratio is based on the prices of the peak value. "Gold prices have dropped, but still they are above 70 percent of the peak value," he said. He added that the bank does not lend against gold in the conventional manner and that its portfolio of Rs

35,000 crore comprises agricultural advances to farmers wherein pledging of gold as a security increases the value of the advances he or she gets. "As of now there is no immediate impact of the drop in prices. Generally our gold is only moral suasion, very seldom we forcibly take away the gold and realise the gold. To that extent, we are not so much dependent on the value of the gold," he said. It should be noted that sector regulator Reserve Bank of India has for long been expressing concerns over a potential stress because of the rise in gold loans. It also decreased the LTVs for non-banking lenders to 60 percent because of concentration risks in April 2012. However, the strongly regulated banks are outside this limit. The comments from SBI chief come amidst a steep fall

in the value of gold Tuesday, which has hit a 21-month low of Rs 1,160 to Rs 26,440 tracking weak global cues. Today's fall is the third consecutive decline. The yellow metal had hit a 15-month low to Rs 27,600 per 10 grams on Monday due to persistent selling by stockists, triggered by a heavy sell-off in global markets. Related Stories

Gold price today: City wise Shares of gold loan companies, jewellery makers fall up to 12% Gold stages mild recovery after hitting 19-month low Gold price hits 21-month low; falls by Rs 1,160 to Rs 26,440 Govt slashes tariff value of gold, silver Govt slashes tariff value of gold, silver

Low gold prices to favourably impact macro parameters: Montek

This also had a drastic fallout on the stocks of gold loan companies and jewellery retailers stocks of gold loan companies, which fell over 13 percent. The market reaction came after Reserve Bank has reportedly sought LTV details from pure-play gold loan companies over the past week, since prices started falling. Marketmen said sustained weakness in overseas markets, where gold plunged over 9 percent yesterday to its lowest level since February 2011, on worries over Chinese growth and possible sell-off by struggling Cyprus's central bank, continued to influence the trading sentiment here. In New York, gold plunged 9.35 percent to USD

1,360.60 an ounce. The metal has dropped by USD 200 an ounce, or nearly 13 percent, in the last two trading days.

Gold Loan
The Muthoot Gold loan portfolio is the largest in India as well as all around the globe. It is humbling to know that more than 80,000 people avail our trusted services on a daily basis. For the past 126 years, the company has been serving the interests of customers as its top most priority. Our journey through centuries coupled with the fact that we are still a rapidly growing company highlights the trust and commitment that our customers worldwide have shown in us. With Muthoot Finance Ltd. gold loan services, it takes no more than a few minutes for your gold to generate cash. The simple procedure that we follow allows:

Quick Loan disbursal Loan limit stretches from Rs. 1500 to Rs. 1 crore Pre-payment option-without any penalty Minimal documentation In-house gold evaluation Improves customer service in a shorter response time Strong rooms for providing safe custody for gold ornaments

Being Indias largest gold loan service provider, safeguarding the deposits of gold ornaments is our primary concern. A flexible interest rate policy is what helps us cope with volatile markets. Our gold loan range starts from Rs. 1,500 and stretches up to Rs. 1 Crore. Serving over 80,000 customers daily, we assist almost every section of the society in obtaining quick cash for leveraging their dreams.